ข่าวแจ้งตลาดหลักทรัพย์

of credit with the undrawn amount of USD1.3 million (or 44.90 million Baht) and other contingent liabilities arising from one financial institution s guarantee for GLOBAL to one state-owned enterprise and one company totaling 2.7 million Baht. Risk factors 1. Business Risk 1.1 Expanding Investment The company has planned to expand its current store network steadily. At present, the company operated 7 branches in total, which are located in Roi Et, Khon Kaen, Udon Thani, Chiang Mai, Rayong, Chonburi and Nakorn Pathom. The company is planning to launch additional branches in the Central and the Northeast of Thailand, which requires the investment of ~300 million Baht per branch for acquiring land, building, marketing activities and working capital. Hence, the company exposes to the investment risk resulted from the possibility that new branches may not perform as planned, which can be caused by various uncontrollable factors such as, economic, politic, consumer behavior, etc. Before making investment decision, the company therefore analyses the project feasibility, project risks, and prepares the contingency plan. Consequently, GLOBAL is equipped with sufficient resources to handle with this kind of risks. Moreover, the company has an expertise in operating this business with more than 10 years experience and competitive construction costs for new outlets and land bank sourcing. All in all, these factors help mitigating this risk. With regards to Chiang Mai Branch, there was a fire on 6 November 2008. Accordingly, GLOBAL had stopped the operation at this outlet for a while. However, the company has completely re-constructed and commercially re-launched this outlet since April 2009. 1.2 Accounts Receivable The company operates as a distributor of various products, there may be delinquency risk in the event that customers cannot pay their bills on time. However, the company s cash sales ratio was greater than 84% on average from 2006 to 2007 and even soared to 97.91% (or 3,884.29 million Baht out of total net sales of 3,967.41 million Baht) in 2008. As at the first quarter of 2009, GLOBAL has sales on cash of 993 million Baht, equivalent to 97.90% of total sales. GLOBAL s high cash sales ratios have been resulted from the company s prudent credit approval policy and system. For the credit sales in this year, the company intends to approve credit line to only major customers with good payment records, otherwise, with bank guarantees or aval. This policy therefore helps control the company s delinquency risk. Major customers with approved credit terms are mainly corporate customers, retail stores and contractors. The company has policy of setting aside provision for doubtful accounts according to the estimated non-repayment trend by considering previous track record and current financial status of customers. As at 31 December 2006, 2007, 2008 and 31 March 2009, the company has set aside provision for doubtful accounts of 0.52 million Baht, 2.00 million Baht, 2.22 million Baht, and 2.22 million Baht, respectively. Based on prudent credit approval and strict provision for doubtful accounts, GLOBAL has had actual bad debts of merely 0.02% of its revenue. 1.3 Risk associated with debt serviceability of GLOBAL s related parties (Siam Global Engineering Co., Ltd.) As at 31 March 2009, Siam Global Engineering Company Limited ( Global Engineering ), the company s related party, accounted for 69.78% of GLOBAL s net accounts receivable or 18.70 million Baht (the detail is shown in Section re: related transaction of Siam Global House Public Company Limited). According to the high outstanding proportion, the company s performance may be affected if Global Engineering defaults on repayment. Receivables from Global Engineering were typically past due over 12 months with outstanding balance of 13.24 million Baht or 49.40% of net account receivable. The company did not set aside any provision on this account since GLOBAL s management has reviewed Global Engineering s current financial status, which indicates sufficient source of fund to repay the entire amount of outstanding debt. As at 12 June 2009, Global Engineering completely repaid its debt of 18.70 million Baht to the company. 1.4 Inventory The company offers more than 50,000 product items to customers. As at 31 December 2006, 2007, 2008 and 31 March 2009, the company had inventory of 984.65 million Baht, 1,419.21 million Baht, 1,339.37 million Baht, and 1,373.75 million Baht, representing 47.81%, 39.65%, 37.29% and 34.62% of total assets, respectively. The high portion of inventory can cause the company obsolescence and inventory loss risk, leading to increasing inventory handling costs and other possible damages that can eventually affect the company s liquidity in operations. However, the company has been trying to improve its turnover rate of inventory by developing sales promotion, and returning some outdated products to suppliers. In addition, the company has established internal control system regarding inventory management by incentivizing employees to carefully oversee inventory on hand. Based on closely monitoring system, the company has never been countered with any significant loss of inventory. 1.5 Industry Competition Current competition in retail market of construction material and home decorative products has become more intense due to increasing players and rising market value. From 2005 to 2008, the industry had experienced the annual growth of 18.7%, 13.7%, 4.1% and 7.3%, respectively (despite expanding at the deceleration rate from 2005). Kasikorn Research (no. 2151) has estimated that total value of this market in 2009 will be approximately 300,000 307,500 million Baht, equivalent to -1.5% to 0.8 growth. Kasikorn Research also claims that the government s property tax stimulus package should be the major driver supporting expansion of the entire industry as savings from such incentives by home owners can be spent for buying more home decorative products. At present, the overall economic condition is facing various adverse factors, such as the global financial crisis and domestic political upheaval, which there is currently no supportive factor for retail market expansion of building materials and home decorative products. Nonetheless, the historical consistent positive growth of this market should be one of evidences to ensure that this market is able to weather under any unfavorable economic circumstances and contributes to consistent market development. In fact, construction material and home improvement products can be considered as ones of our life s necessities. According to the aforementioned supportive factors, there are increasing numbers of players, both wholesale and retail, in this market. Most market leaders, such as Home Pro, Home Work, and Cement Thai Home Mart, have continuously expanded its store network into various community and business areas, including convenient stores in Bangkok and other regions. Thus, GLOBAL s sales may be deviated from its initial target, and the market share as well as profit margin may be affected from price competition accordingly. GLOBAL has however initiated a plan to cope with such increasing market competition by emphasizing on differentiation strategy in terms of production distribution and services. For instance, the company offers product variety with more than 50,000 items on its list, covering a number of building materials and related equipment. Therefore, customers can obtain all materials they require for construction, improvement or decoration purposes from only one place. In addition, GLOBAL offers several construction material for structural work, e.g. cement, steel, roofing, etc., while most leading players do not provide these type of goods to customers. GLOBAL also focuses on sourcing manufacturers/suppliers who can manufacture high-quality products with competitive costs for the company. These are primary factors that can help mitigating risk of intense market competition for GLOBAL. 1.6 Risk of fire accident at store There are a number of product items displayed within warehouse store of the company, covering construction material, decorative products, tool and equipment used for construction, improvement, and decoration for home and garden. Accordingly, GLOBAL exposes to risk of fire accident at the company s stores, which can cause damages to life, inventories and buildings. Therefore, the company has been insured against potential accidents/damages that may occur with its warehouse stores and inventories. The company normally reviews the insured amount to be correspondent with its carrying assets value, which the insured value over inventories is commonly re-considered on monthly basis. GLOBAL also provides fire extinguishers at various sections around its stores in case of emergency to mitigate risk and potential damages in case of fire accidents. 1.7 Risk of fire accident at Wiang Khum Kham, Chiang Mai Branch since 6 November 2008 On 6 November 2008, there was a fire at Chiang Mai Branch causing total accounting damages of 434.14 million Baht (including losses of 98.43 million Baht from revaluation surplus of appraisal of building and building improvements in late 2007). The company has however been insured by total line of 426.50 million Baht. Later in late 2008, the company had been informed by the insurance company for the first partial indemnity of 150.00 million Baht. Before the conclusion of entire indemnity payment by insurance company, GLOBAL booked net loss of fire accident of 284.10 million Baht as one items of selling and administrative expenses in 2008. On 5 June 2009, the company received the remaining indemnity of 193.65 million Baht from insurance company. All in all, GLOBAL obtained the insured value of 343.65 million Baht. 2. Financial Risk 2.1 Exchange Rate The company exposes to exchange rate risk since it has imported some products with the respective amount of 168.28 million Baht, 75.15 million Baht, 182.70 million Baht, and 60.12 million Baht in 2006, 2007, 2008, and the first quarter of 2009, representing 6.37%, 2.36%, 5.11%, and 6.64% of total purchasing orders. The company manages this risk by assessing the trend of exchange rate movement and also using forward contract, which the line value of forward contract as at 31 March 2009 was 220.00 million Baht and GLOBAL has not yet utilized this line. The line of forward contract is one mechanism to decrease impact from potential exchange rate fluctuation. In the past, the company has never experienced any significant exchange rate risk; even during May 2008 which the US dollar had weakened continuously. This has resulted from GLOBAL s risk management from forward contracts. 2.2 Interest Rate The company gets financing from short-term and long-term debts as well as OD facility from financial institutions. As at 31 March 2009, GLOBAL had total credit line of 2,560.85 million Baht and outstanding balance of 1,559.53 million Baht. The interest expenses in 2006, 2007, 2008 and the first quarter of 2009 were 31.58 million Baht, 42.46 million Baht, 71.40 million Baht, and 17.87 million Baht, respectively. Since all of the company s obligations are charged at floating interest rate, the company is subjected to the interest rate risk. To deal with the risk, the company closely follows the trend of the interest rate in both global and local markets. Some of GLOBAL s debt obligations are, in fact, charged at Money Market Rate (MMR), the lower rate than normal interest rate. Throughout the company s establishment, GLOBAL has never defaulted on any interest obligation. With regards to long-term debts that GLOBAL has utilized for new store expansion, the outstanding balance of these obligations has been declining steadily. Some stores even fully retired its debts in the periods corresponding to the company s new outlet expansion. Accordingly, the impact of interest rate risk on GLOBAL is relatively low. 3. Risk associated with products and product sourcing 3.1 Sourcing Sourcing is very important factor to the company since it operates as a distributor of building materials, decorative materials, tools and equipments used in building, renovating or decorating home and gardens. GLOBAL s purchase amount has grown continuously parallel to its business expansion, where the purchase value for 2006, 2007, 2008, and the first quarter of 2009, were 2,641.00 million Baht, 3,189.81 million Baht, 3,575.85 million Baht, and 905.90 million Baht, respectively. As the company s core operation is product distribution to its customers, products offered are one of key factors for business success. Hence, the company exposes to the risk that some of its suppliers may cancel the company s order and stop supplying GLOBAL. By sourcing most products directly from manufacturers and building long-term relationship with them, the company can somehow mitigate this risk. 3.2 Fluctuations in the production costs of products As production costs can be volatile dependent on economic condition, GLOBAL is subject to the risk that prices of construction materials may significantly increase, causing the company not able to charge its customers at the same price level. However, the company minimizes this risk by employing cost-plus pricing policy and managing its average sales period to be in line with other major players in the industry. Moreover, the company purchases most products directly from manufacturers, thereby lower costs relative to buying from traders. GLOBAL can therefore maintain its profitability and product prices at appropriate level for customers. In case that product costs have ascended considerably, GLOBAL still has a choice to adjust its price list. Nevertheless, the main rationale for price adjustment should be derived from justified purchasing costs to ensure fairness for customers. 3.3 Change in consumer behavior and Product obsolescence As GLOBAL is the retailer of building materials, decorative products, and equipment for construction, improvement and decoration for home and garden and some items, such as sanitary ware and furniture, normally gain acknowledged within a certain period, GLOBAL accordingly exposes to risk of product obsolescence. Ceramic tiles also cause similar risk as the company needs substantial inventory stocking to adequately serve customers potential demand. Nonetheless, the majority of products generating the company s core revenue are primarily construction materials for structural work such as cement, steel and timber, which commonly have high turnover. Regarding ceramic tiles, sanitary ware and furniture, the company can relocate to new or other outlets, where customers in different areas may have different demands. GLOBAL also has marketing promotional campaigns to eliminate obsolete products. In addition, the company can leverage their bargaining power with many manufacturers, thereby having the ability to return some obsolete products for products with newer model. As a consequence, these factors can help mitigating the risk arising from changes in consumer preference/behavior and product obsolescence for GLOBAL. 4. Operational and Managerial Risk As at 1 June 2009, Mr. Witoon Suriyawanakul as the Director and Chief Executive Officer of GLOBAL held 29.91% of the company s total issued shares, while the group of Suriyawanakul family totally held 72.81% of the company s total issued shares. By having more than 50% of total shares, the Suriyawanakul family gains controlling power over the company and can influence the company s decision making in case requiring a majority vote from shareholders. Therefore, other shareholders would be unable to propose any issue without consent from this major shareholder. Lawsuit As at 31 March 2009, GLOBAL had a lawsuit concerning default payment by customers. At present, the company is in the litigation process with retail customers, totaling 2 cases with total value of 1,963,902.27 Baht (or 0.19% of total revenues during the first quarter of 2009). Number of Employees As at 31 March 2009, the company has 1,110 employees. Company Background Mr. Witoon Suriyawanakul founded Siam Global House Company Limited on 20 December 1995 with an objective to operate as a distributor of building materials, decorative materials, tools and equipments used in building, renovating or decorating home and gardens. Subsequently, Mr. Witoon established Siam Global House (Khon Kaen) Company Limited to operate the similar business on 1 August 2000. On 8 June 2007, Siam Global House Company Limited and Siam Global House (Khon Kaen) Company Limited were merged together with the initial registered capital of 700 million Baht to operate as a distributor of building materials, decorative materials, tools and equipments used in building, renovating or decorating home and gardens with the trademark of Global House . Later, the company was transformed into a public company limited and renamed to Siam Global House Public Company Limited. Investment in subsidiary / As at 31 March 2009, GLOBAL had no investment in subsidiary / associates / related companies associates / related companies. Change in capital for the previous three years (expressed in million Baht) D/M/Y Increase Paid-up Capital after Notes / Use of proceeds (Decrease) in Increase (Decrease) Paid-up Capital 4 March 2008 260.00 960.00 IPO 260.00 million shares to general investors during 10, 11 and 13 August 2009 (IPO Period). Proceeds will be used to finance new branch expansion and for working capital. Note: The company s registered capital has not been changed during the period prior to 2008 as there was merging between Siam Global House Co., Ltd. and Siam Global House (Khon Kaen) Co., Ltd. Accordingly, the registered capital in the last three years presented here is merely derived from the company s pro forma financial statements since 2006. Accounting Period 1 January to 31 December Auditor Mr. Methee Ratanasrimetha, M.R. & ASSOCIATES Co.,Ltd. Share Registrar Thailand Securities Depository Company Limited Financial advisor Asset Pro Management Company limited Dividend Policy The company has a policy to pay dividend of not less than 30% of net profit after all required reserves are appropriated according to the company s articles of association and regulation. The dividend payment is subject to matters that there are no other necessities and such shall not have significant impact on the company s operation. BOI certificate None Number of Shareholders As at 14 August 2009, Name of shareholders Number of Number of % of paid-up shareholders shares capital 1. Strategic shareholders 1.1. Directors, manager, and executive management 9 699,200,000 72.83 including related persons and associated persons 1.2. Shareholders who have a holding of above 5% - - - including related persons 1.3. Controlling shareholders - - - 2. Non-Strategic shareholders hold >=1 trading unit 2,588 260,800,000 27.17 3. Non-Strategic shareholders hold < 1 trading unit - - - Total shareholders 2,597 960,000,000 100.00 Major Shareholders As at 14 August 2009, Name of shareholders Post-IPO Pre-IPO Number of % of paid-up Number of % of paid-up shares capital shares capital 1. The Suriyawanakul Family 1.1. Mr. Witoon Suriyawanakul 287,156,510 29.91 287,156,510 41.02 1.2. Mr. Anawat Suriyawanakul 229,590,000 23.92 229,590,000 32.80 1.3. Mrs. Warunee Suriyawanakul 91,313,980 9.51 91,313,980 13.04 (more)